Sunday, September 21, 2014

Frances, in the moment

From Frances Coppola's Ultra-liquidity:
We already know that post-crisis, monetary policy can no longer use reserve scarcity to create the illusion of money drought...

If ultra-liquidity is here to stay, as seems likely, we must either re-unify monetary and fiscal policy or resign ourselves to central bank impotence.
From BIS central bank warns against 'illusion of permanent liquidity':
Loose monetary policies have created an "illusion of permanent liquidity" ...

"The longer the music plays and the louder it gets, the more deafening is the silence that follows," Claudio Borio, who heads the BIS's monetary and economic unit, told reporters.

"Markets will not be liquid when that liquidity is needed most," he warned, urging "sound prudential policies (and) extra prudence on the part of market participants themselves".

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